Covers all updates and latest issues of Income Tax

1. INCOME TAX ACT
- Jai Google Devta –
http://praveenpammy.blogspot.com/

2. BASIC INFORMATION:
basic Income Tax Act classifies Income into following
info Heads:
6 Salary
8 House Property Income
10 Capital Gain
12 Business Income
14 Income from Other Sources

3. KEY INFORMATION:
key Income from Salary
info Key Points:
In certain cases, an employee can claim both HRA as well as
Interest on Housing Loan.
Income from House Property
Key Points:
If interest paid for property given on rent is less than taxable
rent (after standard deduction – 30%), such loss can be set
off against income from other heads including Income from
Salary.
Income from Capital Gains
Key Points:
Surplus/Deficit from Derivative Contracts is non-speculative.

4. CAPITAL ASSETS:
key From 01-04-2008, personal effects would not
info include:
6 Archaeological collections
8 Drawings
10 Paintings
12 Sculptures
14 Any other work of Art
Thus, now any surplus received from sale of these
articles would be liable to tax under the head Capital
Gain.

5. KEY INFORMATION:– SECTION 80C
key Following amounts claimed as deduction u/s 80C are
info included in Income of the assessee:
• Stamp Duty, Registration Charges, Principal
repayment amount, if the property in respect of
which these claims were made is transferred before
the expiry of 05 years from the end of financial
year in which possession is obtained.
• Insurance amounts paid in respect of single
premium policy if the policy is terminated within 02
years from the date of commencement of policy.
• Insurance amounts paid in respect of insurance policy if
the policy is terminated before premiums are paid for 02
years.
• ULIPs are terminated before contributions in
respect of such participations have been paid for
05 years.

6. coMPLiances UnDeR incoMe
TaX acT
Following are the compliances under Income Tax Act
• Deduction of Tax from Certain Payments
• Monthly payment of TDS
• Monthly filing of Form 17
• Quarterly filing of TDS details
• Annual filing of TDS returns (Currently Quarterly)
• Quarterly payment of Advance Tax and FBT
• Annual filing of Income Tax and FBT Return
• Payment of Dividend Distribution Tax
• Compliances in relation to Assessment Proceedings

7. iMPoRTanT ADVANCE INCOME TAX/FBT DUE DATES
DUe DaTes ADVANCE AND FRINGE AGGREGATE TAX
BENEFITS TAX PAYABLE UP TO Due Date
PAYMENTS DUE DATE
Companies Others
1 First Installment 15% Nil 15th June
2 Second Installment 45% 30% 15th Sept
3 Third Installment 75% 60% 15th Dec
4 Final Installment 100% 100% 15th Mar

8.  Setting up of Unit in an approved SEZ on or after
01/04/2006
Deduction under the Income Tax Act:
For first 05 years 100% of profits of the
undertaking (derived from
exports
10aa
For next 05 years 50% of profits of the
undertaking (derived from
sPeciaL exports)
PRovision
For next 05 years 50% of profits of the
in ResPecT undertaking (by way of
of new transfer of
UniTs in transfer of profits to SEZ
Reinvestment Reserve
seZ Account to be later used
for acquisition of plant and
machinery)

9. secTion Section 14A -
14a No Deduction is allowed in respect of expenditure in
relation to the income which does not form part of
Total Income.
Rule 8D – Assessing Officer has power to
compute the amount of non-admissible amount.
The amount would be aggregate of:
• Expenditure directly attributable
• Proportionate Interest not attributable to any
particular activity
• 0.5% of the Avg. value of Investment

10. sec 32
sPeciaL PRovisions UnDeR incoMe
TaX acT Sec 32 - Depreciation:
 Additional Depreciation
New machinery or plant (excluding ships and
aircrafts) acquired and installed after March 31,
2005 by an assessee engaged in the business of
manufacture or production of any article or thing
is entitled to additional depreciation of 20%.
However no such additional deduction will be
allowed in respect of —
• Machinery or plant used by any other person in
India or outside India before its installation.
• Machinery or plant installed in any office premises
or any residential accommodation, including a guest
house.

11. sec 32
sPeciaL PRovisions UnDeR
incoMe TaX acT
• Any office appliances or road transport vehicles.
• Any machinery or plant, the whole of actual cost of
which is allowed as deduction in computing income
chargeable under the head profit and gain of
business or profession of any one previous year.
• It should be noted that Additional
Depreciation is allowed only in the year in
which the Plant and Machinery is first put to
use.

12.  Accelerated Depreciation:
sec 32 • New commercial vehicle which is acquired on or
after the 1st day of January, 2009 but before the
30th day of September, 2009 and is put to use
before the 30th day of September, 2009 for the
sPeciaL purposes of business or profession , will get 50%
depreciation.
PRovisions
• It should be noted that Commercial has no relevance to
UnDeR business of hiring of vehicles. “Commercial Vehicle” is
incoMe TaX a term used from Motor Vehicles Act.
acT • Commercial vehicle” means “heavy goods vehicle”
(12000 kg), “heavy passenger motor vehicle”
(12000 kg), “light motor vehicle” (6000 kg),
“medium goods vehicle” and “medium passenger
motor vehicle” but does not include - “maxi-cab”,
“motor-cab”, “tractor ” and “road-roller”.

13. Sec 40A(3) – Cash Payments
Expenditure incurred in excess of No Deduction
Rs. 20,000/- by Cash (Earlier 20%
sec Disallowance)
40a{3} Cash payment made against The payment
PayMenT any liability of previous year in made is deemed
excess of Rs. 20,000/- to be income
in eXcess
of Rs. From 01-04-2009, even aggregate payments made
20,000/- during a day in excess of Rs. 20,000/- would be
disallowed.
by cash

14. sec Section 41(1) and Sec 59:
41 (1) Where an allowance or deduction has been made in
the assessment year in respect of loss, expenditure
or trading liability incurred by the assessee and
subsequently during any previous year any benefit
& is derived by the assessee, then that benefit is
chargeable to Income Tax as income from business
sec or profession.
59 Also, if any amount is received in excess of WDV of
Block of Asset, then so much of the excess as does
not exceed the difference between the actual cost
and the written down value shall be chargeable to
income-tax as income of the business.

15. sec Where an asset representing expenditure of a capital
nature on scientific research (Sec 35) is sold, the amount
41(1) received to an extent of deduction claimed is charged as
business Income.
& Bad Debts recovered are business income.
sec However, remission of Capital Liability is not business
income.
59

16. Sec 80IC – Deduction of Income of
Undertakings from Special Category States:
80ic  Business of Manufacturing of Articles except as
specified in XIII Schedule
DeDUcTion
 Commences production between the period –
of incoMe 07/01/ 2003 and 01/04/ 2012
of UnDeR
 Notified areas of the State of Himachal Pradesh or
Takings the State of Uttaranchal
fRoM Deduction under the Income Tax Act:
sPeciaL For first 05 years 100% of profits of the
caTegoRy undertaking
sTaTes For next 05 years 30% of profits of the
undertaking

17. Sec 145A – Valuation of Closing Stock
As per Accounting Standards -
sec 145a Para 6 and 7 of AS-2 " Valuation on Inventories"
implies that "Cost of Purchases" includes only
those taxes, which are not subsequently
vaLUaTion recoverable by the enterprise from the taxing
authorities."
of cLosing
sTock As per Income Tax (Section 145A) –
Notwithstanding anything to the contrary contained in
section 145, the valuation of purchase and sale of
goods and inventory for the purposes of
determining the income chargeable under the head
“Profits and gains of business or profession” shall
be—
(a) in accordance with the method of accounting
regularly employed by the assessee; and

18. sec 145a
(b) further adjusted to include the amount of any tax, duty,
cess or fee (by whatever name called) actually paid or
vaLUaTion incurred by the assessee to bring the goods to the place of
of cLosing its location and condition as on the date of valuation
sTock Reporting Requirements
Effect needs to be quantified in the Tax Audit Report.
Mum ITAT – Dy. CIT v/s Hitech Plast Containers Pvt.
Ltd., it was held that irrespective of the method
followed by the assessee for accounting excise
duty, adjustments as specified u/s 145A are to be
made.

19. Interest inadmissible under Sec 23 of MEMED
Act, 2006:
issUe
Notwithstanding anything contained in the Income-
tax Act, 1961, the amount of interest payable or
MsMeD paid by any buyer, under or in accordance with
the provisions of this Act, shall not, for the
acT, purposes of computation of income under the
Income-tax Act, 1961, be allowed as deduction.
2006:
 Due Date of Payment
• Due date as agreed by the buyer and seller in
writing
• If not agreed in writing, due date is 15 days from
the date of acceptance
• In no case, the period agreed in writing shall
exceed 45 days

20.  Interest Payable
• Compound interest with monthly rests at 03
issUe times of the Bank Rate.
 Disclosure Requirements
• Principal & Interest Due (Separately) to supplier
MsMeD at year end
acT, • Amount of Interest Paid u/s 16 & amounts paid
beyond appointed date.
2006: • Amount of interest due and payable for the period
of delay in making payment.
• Amount of interest accrued and remaining
unpaid.
• Amount of further interest remaining due and
payable even in the succeeding years, until such
date when the interest dues as above are actually
paid.

21. Provision For Warranty Claims:
issUe –
In a recent judgment by Supreme Court of India
in “Rotork Controls India Pvt. Ltd., it was held
waRRanTy that:
cLaiMs For a provision to qualify for recognition there
must be a present obligation arising from past
events, settlement of which is expected to result
in an outflow of resources and in respect of which
a reliable estimate of amount of obligation is
possible. Thus, if historical trend from the data
maintained by the assessee suggests that defects
exist in some of the items manufactured and sold,
then provision made for warranty in respect of
goods sold during the year would be entitled as
allowable expenditure.

22. CERTAIN DEDUCTIONS – PAYMENT BASIS:
issUe
G Ltd borrowed a certain sum of money from a public
sec -43 financial institution for 10 years. In the first year itself, it
restructured the loan by paying a sum of Rs. 8 Crs. to the
b institution. The Company claimed the amount as revenue
expenditure. AO is of the view that the amount has to be
amortized over the period of 10 years.
Sec 37(1) and Sec 43B / Delhi High Court Commissioner
of Income Tax v/s Gujarat Guardian Ltd.

23. New Procedure for Remittance w.e.f. 01-07-
new 2009 (Notification No. 30/2009):
PRoceDURe
Current Procedure:
Instructions are given to Bank for payment along
foReX with a Certificate obtained from Chartered
Accountant regarding applicability of TDS and
PayMenTs payment thereof.
New Procedure:
Certificate to be obtained from Chartered
Accountant in Form 15CB
Form 15 CA to be filled in and upload on designated
Income Tax site for which an Online
Acknowledgement would be generated
Instructions to be given to Bank along with the
Acknowledgement.

24. THANK YOU
Prave e n Kumar
